Spire Global, Inc.

Peter Platzer, CEO, and Tom Crywee, CFO. As a reminder, our commentary today will include non-GAAP items. Reconciliations between our GAAP and non-GAAP results, as well as our guidance, can be found in our earnings press release. Some of our comments today may contain forward-looking statements that are subject to risks, uncertainties, and assumptions. In particular, our expectations around our results of operations and financial conditions are uncertain and subject to change. Should any of these expectations fail to materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. A description of these risks, uncertainties, and assumptions and other factors that could affect our financial results is included in our SEC filings. With that, let me hand the call over to Peter.

The second quarter was another quarter of strong growth and progress to its profitability. In addition to SPIRE adding yet another quarter to our unbroken record of quarterly revenue growth since becoming public, we exceeded expectations by delivering more revenue and stronger margins than anticipated. Alongside our strong results, we continue to see broad-based demand for our solutions. We signed another 32 solution customers, achieving nearly $113 million in ARR and yet again increased our rolling 12-month organic net retention rate to 117%. Based on first-half results that exceeded our guidance and market expectations, we are thrilled to improve our margin guidance for the full year and share these important anticipated milestones. We expect to generate positive cash flow from operations during the fourth quarter of this year, be adjusted EBITDA positive in the first or second quarter of next year, 2024, deliver positive operating margins in the second quarter of 2024, and be free cash flow positive in the second or third quarter of 2024. I could not be more proud or excited about Spire's prospects for profitability and sustainable growth. The macro environment has become more stable over the past quarter. The U.S. Federal Reserve is no longer forecasting a recession, and markets are showing strength. With businesses adjusting to our interest rates and a more stable outlook, we are seeing a renewed focus from customers looking to drive costs out of their business. We have not seen a further degradation in time to contract, and in some instances, we have actually seen some of the fastest time to contract since becoming public. The flip side to these improved macro conditions is a still very tight capital market that is putting a conservative overlay to the business environment in terms of customers making investments for their growth. Businesses continue to be ever more aware of the risk and cost that weather and climate have on their operations, and I am increasingly eager to find solutions to manage, mitigate, and reduce that risk and cost. At the World Economic Forum Davos this year, the burgeoning future of space-based businesses was top of mind. The global management consulting firm McKinsey values the space market at $447 billion this year and on track to exceed $1 trillion by 2030. In fact, McKinsey recently stated that, we believe that space is at the point at which leaders must consider its potential impact and, more importantly, begin to shape their organizational strategy to unlock the potential of this domain as it accelerates over the next 5 to 10 years. Irrespective of industry, investments, or daily plans, the world is now remarkably interconnected. Global events from severe weather to cargo congestion draw us closer together. The world has seen the hottest days in hundreds, if not thousands, of years. Wildfire smoke has impacted many cities and communities thousands of miles away. Flooding has severely impacted many diverse geographic areas, and the U.S. has already seen 12 weather events in 2023 alone, with losses exceeding $1 billion each. These extreme weather events are causing insurance companies to re-evaluate the geographic areas they are willing to cover. Against this demand backdrop, Spire has been building over the last 10 years the technology to gain insights to better navigate this changing environment. With more than 100 low-Earth multi-use receiver satellites in orbit, SPIRE's Earth observation coverage is near real-time and spans the entire globe. This comprehensive network empowers companies and governments worldwide to leverage radio frequency intelligence to make decisions with confidence, in a rapidly changing world, reduce costs from climate and weather risks, and strengthen global security. This is not a vision of what we plan to do in the future. It is built today, and we are utilizing it for our customers to make a meaningful impact to the world around us. Aspire's unique data collection methods and world-leading analytics open a range of use cases. enabling weather forecasting, monitoring ocean winds and waves, plotting and monitoring optimal courses for cargo ships, forecasting weather that could impact a power grid, estimating takeoff and arrival times for airlines, even measuring headwinds that could impact a flight's fuel usage. We are leveraging the continued advancements in machine learning and AI to provide insights that were not previously available. We have used this technology to combine our weather forecast with publicly available data to create even more accurate forecasts and to determine the probabilistic forecast for specific customer needs. Using AI, we are also able to create better soil moisture estimates at a higher resolution than would be otherwise possible, as well as provide predictive analytics using our historical data to infer the likely estimated time of arrival for a vessel and likely weather conditions during their voyage. Against this backdrop and the multi-billion dollar global weather forecasting services market that's expected to double by 2030, SPIRE has continued to invest in our weather prediction capabilities. We recently rolled out our deep vision weather solution and high resolution forecast models. Deep Vision is a cross-industry weather solution which moves us up the value chain from clean and smart data to decision solutions for our customers. We help our customers answer the question, what should I do? Our weather dashboard and weather risk communication support team are trusted partners for our customers who need the most accurate weather data to be able to quickly make decisions that impact the safety of people and property. With our new high-resolution weather product, we're taking our global weather model and improving the resolution 144 times to a one-by-one kilometer resolution. This provides additional detail to help understand what populated areas are at risk, what infrastructure is at risk, and what weather is occurring around important weather transition zones, such as land-sea interface or in mountainous or hilly terrains. With a powerful combination of our leading forecasts, high-resolution weather model, and on-call weather experts, we can provide enhanced knowledge of likely weather outcomes, coded in simple red, yellow, and green status to indicate levels of risk and allow our customers to take appropriate action. Such action could include pre-positioning crews before weather events, so utilities can restore services as soon as possible, or suspending site operations and moving at-risk assets, or helping supply chain leaders make decisions related to transporting weather or time-sensitive goods. The annual cost of not making these decisions is estimated in the hundreds of billions of dollars. Spire's mission is to help the world reduce that cost significantly. For over a decade, Spire has actively grown our datasets. Every second our datasets grow, we increase our ability to create machine learning models and train AI for predictive insights across virtually all industries. One such dataset is radio-occultation data. Spire is the largest provider of radio-occultation data in the world, with the ability today to produce approximately 20,000 so-called RO profiles daily. The addition of these proprietary RO profiles to numerical weather models has resulted in SPIRE's global forecasts consistently outperforming leading public global forecast models. However, the forecast improvement does not stop with 20,000 RO profiles. Scientists have demonstrated increased forecast accuracy with the addition of up to 100,000 RO profiles a day. SPIRE empowers our customers with the ability to predict weather events with heightened precision and accuracy, meaning early warnings for severe weather phenomena are more reliable. Customers such as NASA are purchasing this data from SPIRE in increasing amounts. We recently announced that we have renewed and increased our NASA contract to $6.5 million for Earth observation data, including GNSSRO, which can be assimilated into weather models, GNSSR, which can measure sea ice, soil moisture, and ocean surface wind speed, and space weather measurements. As our customers continue to look for answers in this ever-changing environment, Spire stands ready to serve them with our growing set of unique data sets and powerful insights about Earth. For several years now, the aviation industry was impacted by lower demand driven by COVID. However, we are now seeing global travel demand approach 2019 levels again, and we have seen domestic travel demand in some markets surpass 2019 levels. The aviation market was one which SPIRE targeted early on. While our aviation business lacked our other three businesses and did not contribute as meaningful to SPIRE's impressive growth over the past several years, primarily due to the impact of COVID, we are very excited about the opportunities in front of us for our aviation solution and the increased demand for SPIRE's products and capabilities. Monitoring planes from space offers one of the most notable advantages, unrivaled accessibility to even the most remote areas as well as continents with burgeoning and rapidly growing aviation activity like Asia and Africa. These are areas that planes fly over, but do not have traditional ground-based assets to track their moments. Spire now has over 500 years of flight heritage, operating sensors and satellites in space, and more than a decade of experience in satellite design, mission operations, and radio frequency technology. Given this impressive pedigree, SPIRE, and only SPIRE, was uniquely positioned, co-contract with the European Space Agency, to build a best-in-class system designed to make the skies safer. This €16 million contract is to design and demonstrate a satellite-based aviation surveillance system for ESA's Euryalo program. Currently, air traffic surveillance heavily relies on radar systems, a technology dating back to World War II. These radar systems have drawbacks, including high costs, demanding maintenance, and some technical limitations. Additionally, they fail to provide coverage in vast areas such as the oceans, remote or mountainous regions, as well as the 90% of the world population living outside the Western world. Modern air traffic surveillance systems, like terrestrial and space-based ADS-B, depend on the global navigation satellite system to determine an aircraft's position. However, GNSS signals can be interfered with or spoofed, leading to inaccuracies in tracking aircraft locations, ultimately impacting air traffic control operations. Recent incidents over the Baltic Sea exemplify these potential risks. Frequent GNSS jamming in the area has disrupted civilian air traffic, necessitating rerouting that causes delays and increases fuel burn, resulting in higher emissions and costs. Even super yachts employing GNSS jamming to evade paparazzi have inadvertently affected ATC operations in the vicinity. The Urealo program is intended to develop and demonstrate a first-of-its-kind aviation surveillance system that will independently determine aircraft position using geolocation. It will be complementary to existing surveillance systems, providing reliable and resilient space-based surveillance solutions. Beyond this significant opportunity that could potentially be selected to build out the full constellation of a large number of satellites, we are seeing growing interest from aviation-related technology companies. One area where space-based ADS-B data has had a significant impact is in airline economics. In the North American market alone, there is an estimated potential of $600 to $800 million of achievable savings for carriers flying narrow-body aircraft. Having granular and holistic data on costs is crucial for airlines, and it helps them to easily identify areas where they can reduce spending and improve efficiency. This can include everything from fuel consumption and maintenance expenses to fleet planning and route optimization. In order to create comprehensive bottom-up models, accurate historical flight data is needed to better understand which flights actually took place, meaning scheduled flight data cannot be relied upon. SPIA's flight report, which aggregates hundreds of millions of satellite and terrestrial ADS-B positions to provide actionable flight, aircraft, and airline metadata, was chosen by both RDC Aviation and Skylark to support their businesses. With an estimated 1,500 aviation-related technology companies that can benefit from integrating SPIRE's global flight analytics and insights, SPIRE has plenty of room to push the envelope with our aviation solution. And that's exactly what we're doing. Last year, We brought the world insights on the location of sanctioned Russian oligarch yacht movements. Just recently, we noticed something interesting regarding sanctioned Russian oligarch plane movements. We have seen more reporting on airplane turbulence recently, an expert estimate that severe turbulence has increased 55% over the past 44 years. Spion has the ability to track clear air turbulence, which can improve the safety of a flight. And as air travel demand has returned, we're looking to bring insights around fuel burn and emissions while aircraft are taxiing on the ground. The Uriallo Awards is a great example of how geolocation is being utilized for civil and commercial means in the future. SPIRE currently operates over 40 satellites that help detect and geolocate signal interference, jamming, and spoofing. We have upcoming deployments of new satellites such as customer Sierra Nevada Corporation's four-satellite RF and geolocation cluster. These satellites can identify the power, location, and directionality of such events in multiple frequency bands. With these capabilities, we are continuing to see customer demand for our radio frequency geolocation data from those groups tasked with providing global security. While we can't openly discuss the continued demand we're seeing in this segment, we can say we have recently received additional multimillion-dollar agreements for RFGL real-time tasking. In addition to the strength and future opportunities we see in our weather and aviation businesses, we are continuing to see demand in our space services and maritime businesses. Just yesterday, GHG said a leader in greenhouse gas monitoring announced that they are expanding their existing contract with us to add four additional satellites to the three that were announced last year. And during the quarter, Spire signed an agreement with Aurora Tech to build, launch and operate an eight-satellite constellation dedicated to global temperature monitoring. Aurora Tech has successfully operated a precursor sensor in orbit on a satellite designed, built and operated by Spire for 18 months. Initially intended as a technology demonstration, it exceeded expectation and is now serving as an active fire monitoring instrument for customers across the globe. In our maritime business, a market that is early in its digitization journey, we announced that Navidium will integrate SPIOS data to help users track vessel positions along a route, re-optimize routes based on various conditions, and automatically record environmental compliance data. Navidium is also leveraging SPIOS historical and real-time ARS data to train machine learning algorithms that provide users with AI insights to augment decision-making and optimize their vessels for safety, emissions, and performance, giving them an edge in a highly competitive environment. Speaking of AI, not only are we utilizing it to enhance our customer offerings and provide new analytics and insights, we are also using it to improve our internal processes. Given our large number of multi-sensor satellites, we have a vast number of options to consider when it comes to deciding what data to collect from which satellite at what time as a satellite is passing over an area. we've successfully deployed an optimizer tool to help us with this decision-making. We start by providing requirements such as how many RO profiles or the number of ARS or ADS-B messages we would like to collect. This information is combined with the capabilities and positions of each satellite. Our optimizer will then suggest how best to configure our satellites to achieve our goal. This has made our satellite operations much more effective and provides the ability for us to scale our constellation as the market dictates without a corresponding growth to our operations. We plan to incorporate AI capabilities to further improve the robustness and operability of our optimizer tool. In the eight quarters that we have been a public company, we have delivered high revenue growth, and improving profitability metrics. Given this reliable execution, we need a backdrop of a large and growing demand for our products. We are excited about the prospect of all of our key profitability metrics turning positive over the next three quarters, starting with positive cash flow from operation, which is expected in Q4 of 2023. Just as the internet brought the world of commerce and utility to our doorsteps, Space-based data is connecting us with the environmental and security realities that surround each of us. It is allowing us to make better decisions with speed and confidence in the context of an increasingly complicated relationship between all the activities happening on planet Earth. I could not be more excited about SPIRE's future as we continue expanding into our growing and global markets convert our top-line growth into bottom-line profitability, and continue to grow our impact on making the world a more safe, sustainable, and prosperous place for all. And with that, I'll turn it over to Tom.

Thanks, Peter. We had another strong quarter of execution from the top line down to margins with revenue, non-GAAP operating loss, adjusted EBITDA, non-GAAP loss per share, and ARR solution customers all coming in above the high end of our guidance. Our results also provided another successful quarter methodically progressing on our trajectory towards profitability. Q2 revenue increased 37% year over year to $26.5 million, once again hitting a quarterly record and exceeding the high end of our guidance by $1.5 million. Gross margins expanded to 64% on a GAAP basis and 68% on a non-GAAP basis, representing a 13 percentage point improvement over Q2 2022 on a GAAP basis and an 11 percentage point improvement on a non-GAAP basis. ARR at quarter end was $112.8 million, up 32% year over year, with adding $8 million of sequential growth quarter over quarter. This included a nice mix of adding new logos while expanding with our existing customers. We finished the quarter above guidance with 813 ARR solution customers a net add of 32 customers quarter over quarter. Our Q2 ARR net retention rate was 112%, up from 108% last quarter and in the same quarter a year ago. The rolling 12-month organic ARR net retention rate was 117%, up from last quarter's rolling 12-month organic ARR net retention rate of 116%. Now I'll be discussing non-GAAP financial measures unless otherwise stated. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release that should be reviewed in conjunction with this earnings call. Driven by exceeding our Q2 revenue expectations, our leveraged business model across four solutions, and our high asset utilization, our Q2 operating loss came in at $6.1 million, which is $2.7 million better than the top end of our guidance. This is an improvement of $4 million year-over-year and an improvement of over $3.7 million quarter-over-quarter. Likewise, total adjusted EBITDA for the second quarter came in better than guidance at negative $3 million or negative 11% of revenue, a $4.3 million or 58% improvement from negative $7.3 million in the same period a year ago. We ended the quarter with cash, cash equivalents, restricted cash, and short-term marketable securities of $64.7 million, down $8.3 million sequentially quarter over quarter. Now turning to our outlook for the third quarter and full fiscal year 2023. For the third quarter, we expect revenue to range between $26 million and $27 million. We are holding our full-year guidance at a range between $104 million and $109 million. We expect a single quarter drop in ARR to range between $107.5 million and $108.5 million. This anticipated decrease is due to the timing of one ARR contract finishing prior to other ARR contracts coming online. We remain confident in the opportunity to win back that contract along with executing on our strong Q3 and Q4 2023 pipeline like we did in Q1 and Q2 of this year. As such, we are holding our full year ARR guidance at a range between $129 million and $135 million. We are continuing to see expanding demand for our solutions and expect third quarter ARR solution customers to range from $835 to $845. We are increasing the midpoint of our full year ARR solution customer's guidance, which now ranges from $855 and $875. Given the operational leverage we are continuing to see across our headcount and infrastructure, we anticipate third quarter non-GAAP operating loss to range between $7 million and $6 million, which is a $4.9 million or 43% improvement year-over-year at the midpoint. For the full year, we are improving our guidance by $2 million at the midpoint, and we expect non-GAAP operating loss to range between $32 million and $27 million. Adjusted EBITDA for the third quarter is expected to range from negative 3.5 million to negative 2.5 million, which represents an improvement of 5.3 million, or 64% year-over-year at the midpoint. For the full year, we are improving our guidance by $1 million at the midpoint, with a range from negative 18 million to negative 13 million. We expect non-GAAP loss per share for the third quarter to range from negative 8 cents to negative 7 cents, which assumes a basic weighted average share count of approximately 167.1 million shares. We are improving our full year guidance for non-GAAP loss per share by 4 cents at the midpoint, with our non-GAAP loss per share to range from negative 32 cents to negative 29 cents, which assumes a basic weighted average share count of approximately 157.5 million shares. Given the strong results in the second quarter, we expect some very exciting milestones in the upcoming quarters. We expect cash from operations to turn positive later this year, non-GAAP operating margins turning positive in the second quarter of 2024, adjusted EBITDA turning positive by the first or second quarter of 2024, and we expect positive free cash flow by the second or third quarter of 2024. Additionally, we expect to execute a reverse stock split within the next 30 days, designed to regain compliance with our New York Stock Exchange listing requirements. We have seen two quarters in a row of revenue, ARR solution customers, non-GAAP operating loss, non-GAAP loss per share, and adjusted EBITDA results exceeding our expectations, and this has allowed us to improve our margin expectations for the full fiscal year. We remain focused on execution, and we are excited about the opportunity ahead. Thanks for joining us today. Now I would like to open up the call for questions.